Cartilage contains an extensive extracellular matrix and provides mechanical strength to help resist compression in joints. Cartilage also serves as the template for growth and development of most bones. Extracellular matrix molecules such as perlecan, link protein, aggrecan, and type II collagen are expressed during chondrocyte differentiation. Mutations of these genes and regulatory factors result in impaired cartilage formation and malformation of the limbs, craniofacial bones, and appendicular skeleton. Cartilage formation is initiated by mesenchymal cell condensation to form primordial cartilage. This is followed by chondrocyte differentiation, which includes resting, proliferative, prehypertrophic, and hypertrophic chondrocytes. As the final step in endochondral bone formation, hypertrophic cartilage is invaded by blood vessels and osteoblasts, and the calcified cartilage is subsequently replaced by bone. Thus, spatial and temporal regulation of chondrocyte differentiation is essential in determining the length and width of skeletal components. In vertebrates, gap junction proteins consist of two families, connexins (Cxs) and pannexins (Panxs). The Cx family has more than 20 members. Mutations of Cxs cause human diseases, including cancer, hypertension, atherosclerosis, and developmental abnormalities. The Panx family consists of only three members, Panx1, 2, and 3. Panx3 is the member that was most recently identified by genome bioinformatic analysis. Although Panx3 is expressed in certain soft tissues, we found high levels of Panx3 expression in developing hard tissues, including cartilage and bone. We previously showed that Panx3 functions to promote chondrocyte differentiation by regulating intracellular ATP/cAMP levels via a Panx3-hemichannel, which in turn counteracts the PTH/PTHrP signal pathway. Osteoblasts differentiate from mesenchyme stem cells and form bone through endochondral and intramembranous ossification. BMP2 induces the master osteogenic transcription factors Runx2 and osterix. This leads to the activation of osteogenic marker genes and subsequently to terminal differentiation of osteoblasts and mineralization. Ca2+ is a universal intracellular signaling molecule that regulates cell proliferation, differentiation, morphology, and function. Intracellular Ca2+ concentrations can rise via Ca2+ influx from the extracellular space and/or release from the endoplasmic reticulum (ER), an intracellular Ca2+ storage organelle. This occurs when cells are activated by extracellular stimuli such as ATP. We demonstrated that Panx3 promoted differentiation of osteoblasts. Unlike Cxs, we found that Panx3 functioned as a unique Ca2+ channel in the endoplasmic reticulum (ER), which was activated by Akt signaling and promoted osteoblast differentiation. Panx3 also formed hemichannels that allowed the release of ATP into the extracellular space and activation of ATP receptors following the activation of PI3K/Akt signaling. In addition, Panx3 formed gap junctions and propagated Ca2+ waves between adjacent cells. Our findings reveal that Panx3 promotes osteoblast differentiation by functioning as an ER Ca2+ channel, a hemichannel, and by forming gap junctions. Since Panx3 is induced in the transitional stage from proliferation to differentiation during osteogenesis, we hypothesized that Panx3 may also play a role for the inhibition of osteoprogenitor cell proliferation. Canonical Wnt/beta-catenin signaling and BMP promote the proliferation and differentiation of osteoprogenitors, respectively. However, the regulatory mechanism involved in the transition from proliferation to differentiation is unclear. We showed that Panx3 plays a key role in this transition by inhibiting proliferation and promoting cell cycle exit. Using C2C12 cells, primary calvarial cells, and calvaria explants, we showed that Panx3 overexpression inhibited cell growth, whereas the inhibition of endogenous Panx3 expression increased it. We found that the Panx3 hemichannel and ER Ca2+ channel inhibited proliferation and promoted cell cycle exit. Our results revealed that Panx3 is a regulator that promotes the switch from proliferation to differentiation of osteoprogenitors. Perlecan (Hspg2) is a heparan sulfate proteoglycan that is found in all basement membranes and in cartilage. Perlecan knockout (Hspg2-/-) mice develop dwarfism with short limbs and die at birth. Perlecan deficiency in humans also causes lethal chondrodysplasia. Thus, perlecan is essential for normal cartilage development in both humans and mice. We previously showed the critical role of perlecan in VEGF signaling and angiogenesis in growth plate formation. Osteoarthritis (OA) is primarily a disease characterized by cartilage degradation. The osteophyte associated with osteoarthritis (OA) is a bony outgrowth that occurs at the margins of the joint. Perlecan (Hspg2) is expressed in the cartilage and in the synovium. In collaboration with Dr. Muneaki Ishijimas group at Juntendo University, we studied the role of synovial perlecan in osteophyte formation using synovial perlecan-deficient mice (Hspg2-/-;Tg). Transgene expression in the cartilage of the Hspg2-/-;Tg mice rescued the perinatal lethality of Hspg2-/- mice. Surgical OA and TGF-beta injection models were used to induce knee OA and osteophyte formation in Hspg2-/-;Tg mice to compare the development of osteophytes in joints with the presence and absence of synovial perlecan. In the surgical OA model, OA developed on the medial side of the knee joints of control and Hspg2-/-;Tg mice. No differences were found for the cartilage degradation score or synovitis score between Hspg2+/--Tg control and Hspg2-/-;Tg mice. However, osteophyte size and maturation were significantly reduced in the OA joints of Hspg2-/-;Tg mice compared to control mice. When osteophyte formation was induced by injection of TGF-beta, osteophyte size and maturation were also significantly reduced in Hspg2-/-;Tg mice compared to control mice. Our findings demonstrate the involvement of synovial perlecan in osteophyte development in OA and provide insights that may facilitate the development of OA therapy.